[Senate Report 104-80]
[From the U.S. Government Printing Office]
Calendar No. 105
104th Congress Report
SENATE
1st Session 104-80
_______________________________________________________________________
REPEAL OF THE DAVIS-BACON ACT
_______
May 12 (legislative day, May 1), 1995.--Ordered to be printed
_______________________________________________________________________
Mrs. Kassebaum, from the Committee on Labor and Human Resources,
submitted the following
R E P O R T
[To accompany S. 141]
The Committee on Labor and Human Resources, to which was
referred the bill (S. 141) to repeal the Davis-Bacon Act to
eliminate excessive Federal construction costs and burdensome
paperwork requirements, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill (as amended) do pass.
CONTENTS
Page
I. Purpose..........................................................1
II. Background and the need for the legislation......................2
III. Legislative consideration and votes in committee................11
IV. Explanation of the bill and committee views.....................12
V. Cost estimate...................................................17
VI. Regulatory impact...............................................20
VII. Section-by-section analysis.....................................20
VIII.Changes in existing law.........................................21
I. Purpose
Senate bill 141 repeals the Davis-Bacon Act of 1931, 40
U.S.C. 276a et seq. and the Copeland Act's weekly payroll
reporting requirements, 40 U.S.C. 276c. Davis-Bacon requires
contractors on Federal construction projects costing over
$2,000 to pay their workers no less than the ``prevailing
wage'' as determined by the U.S. Department of Labor. The
Copeland Act requires Federal contractors to submit weekly
payroll records to the Federal Government.
Through this legislation, the committee will save U.S.
taxpayers $2.7 billion over 5 years through more efficient
management of Federal construction projects. In addition, the
legislation will reduce the paperwork associated with Federal
procurement.
Davis-Bacon was designed to prevent the Federal
Government's purchasing power from depressing local wage rates.
Another purpose was to prevent itinerant contractors from
undermining local firms' wage schedules. These problems may
well have existed during the Great Depression, but
circumstances in the construction industry today are quite
different.
Senate bill 141 will permit market forces to determine the
price of construction. We want the government to pay the market
rate for goods and services procured for U.S. citizens. But we
strongly oppose having the U.S. Department of Labor's Wage and
Hour Division in Washington, DC establish wage rates for
workers on Federal construction projects for every single
county in the United States, especially when these Davis-Bacon
rates are significantly higher than market rates.
In fact, if the Davis-Bacon ``prevailing wage'' actually
were the market wage that prevailed in the locality, then
repealing Davis-Bacon would have no effect at all--taxpayers
would simply pay the true prevailing market rate. But, as
explained below, this is not the case.
The committee believes that Davis-Bacon is no longer
necessary to prevent wages from being bid-down when 80 percent
of the private sector construction market successfully operates
without Davis-Bacon wage supports. Moreover, one original
purpose of Davis-Bacon--to prevent outside contractors from
undermining local firms--has been turned on its head. Rather
than protecting local firms, Davis-Bacon's inflated wage
schedules disadvantage local firms and increase the likelihood
that outside contractors will successfully bid for Federal
projects.
In addition, Davis-Bacon significantly limits job training
opportunities for those on the lower rung of the disadvantaged.
Repeal will create new training opportunities for the
disadvantaged.
Finally, the committee rejects arguments by Davis-Bacon
proponents that repeal will reduce quality, productivity and
safety on Federal construction sites. The committee also
rejects arguments that repeal will cause dire economic
consequences for the construction industry.
In sum, Davis-Bacon is an outdated law, and the committee
recommends that it be repealed.
II. Background and the Need for the Legislation
The Congress enacted the Davis-Bacon Act of 1931 during the
Great Depression, which was a period of great economic
instability. As the Nation's economy went into a tail-spin,
Congress was rightfully concerned that high unemployment might
lead Federal contractors to depress local wage rates as workers
competed for any work they could find.
Congressman Bacon, for whom the Federal prevailing wage law
was named, stated during the debate in the House of
Representatives that ``certain itinerant, irresponsible
contractors, with itinerant, cheap, bootleg labor'' \1\ were
successfully bidding for public works projects. As a result,
they were denying local labor and local contractors the
opportunity to fairly compete on Federal construction
contracts.
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\1\ U.S. Cong., House, floor debate, ``Rates of Wages for Laborers
and Mechanics on Public Buildings of the United States,'' motion to
pass S. 5904, Feb. 28, 1931, passed, 71st Cong., 3d Sess. 74 Cong. Rec.
at 6510 (1931).
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Specifically, Rep. Bacon appeared to be concerned that a
Southern contractor underbid several New York contractors for a
veterans hospital in Rep. Bacon's district. The successful
bidder brought workers from the South to complete the
project.\2\
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\2\ Thioblot, Armand, ``Prevailing Wage Legislation,'' The Wharton
School of Industrial Research, University of Pennsylvania, 1986, p. 29.
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During the Depression, work was scarce. The gross national
product fell by 30 percent, farm prices fell by 50 percent, and
unemployment rose to 25 percent. Construction worker earnings
fell by 50 percent as construction dollar volume slid from
$10.8 billion to $2.9 billion. And 60 percent of the Nation's
new construction was publicly financed.\3\
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\3\ ``The Davis-Bacon Act Should Be Repealed,'' U.S. General
Accounting Office, HRD79-18, April 27, 1979, p. 8 (hereinafter, ``GAO
Report'').
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With the economy contracting, legislators were concerned
that competitive pressures would drive down wages. As economist
Armand Thioblot stated in his book on prevailing wage laws:
The actual purpose of prevailing wage legislation can
safely be characterized as that of protecting local
wage scales from the consequences of competitive
pressures on contractors to submit the low bid. * * *
[During the Depression] * * * many * * * were willing
to take [construction jobs] at almost any wage, thus
driving down the already meager pay rates.\4\
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\4\ Armand Thioblot, ``Prevailing Wage Legislation,'' supra, p. 28.
As the Depression deepened, President Herbert Hoover sought
to deal with the crisis in a variety of ways. In public, he
espoused hope and confidence, attempting to reassure the public
and to encourage the business community. But ``[e]xpressions of
confidence could not mitigate the impact of growing
unemployment and reduced wages.'' \5\ In private, the President
conceded the seriousness of the situation and beseeched
business leaders to halt layoffs and not to reduce wages or
prices, exacting pledges from industry to hold the line. Unable
to stand by such pledges, however, employers ``desperately
[tried] to cut [wages and employment] faster than prices
fell.'' \6\
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\5\ Schwarz, Jordan A. ``The Interregnum of Despair: Hoover,
Congress, and the Depression.'' Urbana, The University of Illinois
Press, 1970. p. 13.
\6\ Sternsher, Bernard. ``Rexford Tugwell and the New Deal.'' New
Brunswick, Rutgers University Press, 1964. p. 30. Dixon Wecter, in
``The Age of the Great Depression, 1929-1941'' (New York, The Macmillan
Company, 1948), p. 17-18, suggested that employers ``contrived to slash
pay rolls about 40 percent between 1929 and September 1931,'' noting:
``Many industries and small businesses denied even lip service to the
administration's plea for maintenance of wage rates.''
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Moving through 1930 and into 1931, President Hoover,
interested in the concept of using public works to revive a
depressed economy, sought additional funding from Congress with
which to complete projects already begun.\7\ Compared with the
scope of the crisis, however, the initiatives were modest.
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\7\ Sternsher, supra, p. 142-145.
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Legislation is Adopted
On January 31, 1931, Labor Secretary William Doak appeared
before the House Committee on Labor and stressed that the
prevailing wage legislation was ``really an emergency
measure.'' \8\ On February 3, 1931, the Secretary made a
similar appeal to the Senate Committee on Manufacturers. The
legislation had been treated by the Administration, he noted,
``as an emergency matter because it really was an emergency
case.'' Referring to the federal construction program then
underway, he explained that ``many of these contractors who
[were awarded contracts] were going into the higher wage
territories and bringing in laborers and mechanics and paying
them reduced wage rates.'' And this practice, Secretary Doak
affirmed, ``was not only disturbing to labor but disturbing to
the business people as well.'' \9\
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\8\ U.S. Congress. House. Committee on Labor. ``Regulation of Wages
Paid to Employees by Contractors Awarded Government Building
Contracts.'' Hearing, 71st cong., 3rd Sess., Jan. 31, 1931. Washington,
U.S. Govt. Print. Off., 1931. p. 2.
\9\ U.S. Congress. Senate. Committee on Manufacturers. ``Wages of
Laborers and Mechanics on Public Buildings.'' Hearing, 71st Cong., 3rd
Sess., Feb. 3, 1931. Washington, U.S. Govt. Print. Off., 1931. p. 2-3.
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Upon the urging of the Administration, Congress acted
quickly. The legislation was adopted without a roll call vote
and, on March 3, 1931, was signed into law by President Hoover
(P.L. 71-798).\10\ The act set the locally prevailing wage as
the wage floor on public building contracts of $5,000 or
more.\11\
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\10\ Congressional Record, Feb. 4, 1931, p. 3918-3919, Feb. 28,
1931, p. 6504-6521, and Mar. 3, 1931, p. 6906.
\11\ The threshold was later reduced to $2,000.
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Those were the conditions when the Congress enacted the
Federal prevailing wage law. At that time, there were no other
Federal worker protections.\12\
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\12\ Later, Congress passed the Fair Labor Standards Act of 1938
(minimum wage, overtime and child labor protections), the Miller Act of
1935 (performance and payment bond requirements to assure that workers
were paid for work performed), the Contract Work House and Safety
Standards Act of 1962 (overtime for working more than eight hours per
day), and the Social Security and Wagner-Peyser Acts (unemployment
compensation and the employment service).
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Supporters of Davis-Bacon rely on protecting local labor
conditions and preventing wages from competitive pressures as
the justification for a continued commitment to a Federal
prevailing wage law. Robert Georgine, the president of the
Building and Construction Trades Council, testified before the
committee:
The philosophy of the Davis-Bacon Act is that the
Federal Government should not use its vast procurement
powers to depress the wages and living standards of
construction workers across the country. That
philosophy is as valid today as it was when the act was
originally passed.\13\
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\13\ Testimony of Robert Georgine before the Senate Committee on
Labor and Human Resources, ``Repeal of the Davis-Bacon Act, S. 141,''
S. Hrg., 104th Cong., 1st Sess., February 15, 1995, p. 4 (hereinafter
``S. Hrg., 104th Cong., 1st Sess.'').
The committee respectfully disagrees with Mr. Georgine that
the Federal Government's ``vast procurement powers'' will
depress workers' wages without Davis-Bacon, and that the
philosophy applied in 1931 is still applicable today. The
committee is confident that our economic situation has
dramatically changed over the past 60 years. As a result,
repealing Davis-Bacon will not cause wages to be bid-down
through competition below the normal local market wage.
times change and our laws must change as well
During the Great Depression, Congress was rightfully
concerned that competition for work on Federal construction
projects might depress local wage rates. When 60 percent of all
construction was publicly financed, as was the case in the
1930's, the government was the single dominant economic force
in construction.
The committee heard testimony from labor economist Armand
Thioblot, who argued that during the Depression, the Federal
Government ``was about the only game in town.'' \14\ However,
Mr. Thioblot pointed out that times have changed:
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\14\ Thioblot, S. Hrg., 104th Cong., 1st Sess., p. 2.
As the economy recovered, private construction began
again and [Federal] contracting lost the element of the
monopsony. Now all public works construction, for State
and local as well as Federal Governments, amounts to
only about 20 percent of the industry's activity, and
government is simply one purchaser among many. The
Davis-Bacon Act here applies a cure (of awesome expense
and complexity) to a problem that simply does not
exist.\15\
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\15\ Thioblot, supra at p. 3.
When the Federal Government is responsible for less than 20
percent of the construction market, it is difficult to suggest
that competition for government contracts would depress local
wage rates.\16\ Such wage depression does not occur in the
private sector, and it will not occur when we repeal Davis-
Bacon.
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\16\ The Federal Government finances 10 percent of new
construction, and State and local governments finance the other 10
percent. See ``Trends in U.S. Construction, 1995 to 1999,''
Construction Review, International Trade Administration, U.S.
Department of Commerce, Fall 1994.
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The General Accounting Office agrees with this analysis.
While examining the changed economic conditions, GAO concluded:
The Davis-Bacon Act is no longer needed. Other wage
legislation and changes in economic conditions and in
the construction industry since the law was passed make
the law obsolete; and the law is inflationary. GAO
believes it should be repealed.\17\
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\17\ GAO Report, supra at p. i.
The General Accounting Office also found that in those rare
cases where, for one reason or another, the Davis-Bacon wage
rate was lower than the market rate in a locality, that
contractors ``paid workers at rates higher than those
stipulated by Labor.'' \18\ So the competition had ``little, if
any adverse effect'' on local wage markets.\19\
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\18\ GAO Report, supra at p. 69.
\19\ GAO Report, supra at p. 69.
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This finding confirmed that competition for Federal
contracts will not depress local wages. Otherwise, firms would
not have paid workers more than required under Davis-Bacon.
davis-bacon adversely affects local contractors
In the committee's view, not only is Davis-Bacon
unnecessary, but its original purpose of protecting local
contractors from ``itinerant'' firms has been turned on its
head. Davis-Bacon makes it more likely that outside contractors
will successfully bid on Federal construction projects.
During the 103d Congress, the committee received testimony
from the National Association of Minority Contractors (NAMC),
whose Executive Director, Samuel Carradine, wrote:
Rather than protecting local contractors from unfair
competition, Davis-Bacon has practically fostered a
closed group of large contractors who follow Federal *
* * construction work around the country to the
exclusion of smaller, local contractors.\20\
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\20\ Testimony of the National Association of Minority Contractors,
``Davis-Bacon Reform,'' S. Hrg. 103-749, July 28, 1994, p. 74.
This anecdotal evidence confirmed the findings of both the
GAO and a research team at Oregon State University, both of
whom found that Davis-Bacon worked to the disadvantage of local
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contractors. According to the GAO:
[t]he increased costs [due to Davis-Bacon] may have had
the most adverse effect on local contractors and their
workers--those the act was to protect--by promoting the
use of nonlocal contractors on Federal projects. We
found that nonlocal contractors worked on the majority
of these projects, indicating that the higher rates may
have discouraged local contractors from bidding.\21\
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\21\ GAO Report, supra at p. 68-69.
Through interviews with contractors, GAO found that
``rather than disrupt their wage structures and worker
classification practices, they [local contractors] would not
bid on federally financed projects.'' \22\ This ``limited the
competition'' for Federal projects and ``probably accounted for
the success of nonlocal contractors with receiving the majority
of the contracts in those localities where Labor's rates were
higher than prevailing rates.'' \23\
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\22\ GAO Report, supra at p. 73.
\23\ GAO Report, supra at p. 74.
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Similar to GAO's findings, the Oregon State University
study of Davis-Bacon in rural areas found that the Federal
prevailing wage law adversely affected local contractors. The
authors stated:
There appears to be some validity to the charge that
the way the Davis-Bacon Act is now administered puts
local contractors at a disadvantage instead of ensuring
local firms and residents their share of the jobs as
the law apparently intended. Compared to contractors on
private projects, contractors on public projects are
less likely to be within the same county as the
project. * * *
Contractors on public jobs were more likely to come
from noncontiguous counties. * * * If we use private
projects as a guide to what would happen in the absence
of Davis-Bacon, the act does seem to have the effect of
making it more difficult for local contractors to
successfully bid on public projects.\24\
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\24\ Fraundorf, Martha Norby, Farrell, John P., and Mason, Robert,
``Effect of the Davis-Bacon Act on Construction Costs in Non-
Metropolitan Areas of the United States,'' Department of Economics,
Oregon State University, January 1982, p. 18.
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davis-bacon unnecessarily raises construction costs
The Davis-Bacon Act promotes a failed procurement policy by
artificially increasing Federal construction costs. According
to the Congressional Budget Office (CBO), Davis-Bacon repeal
will save taxpayers $2.7 billion over a 5-year period.\25\ This
represents a significant budget savings for the country.\26\
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\25\ In its 1983 analysis of Davis-Bacon, CBO (under the direction
of CBO Director Alice Rivlin) stated: ``CBO estimates that the total
amount by which Davis-Bacon raises Federal construction costs (the sum
of these effects) is approximately 3.7 percent.* * * '' ``Modifying the
Davis-Bacon Act: Implications for the Labor Market and the Federal
Budget,'' Congressional Budget Office, July 1983, p. xii.
\26\ In his testimony before the committee, Robert Georgine
criticized the CBO estimate because it allegedly failed to account for
Labor Department administrative changes in computing the prevailing
wage and failed to account for decreased compliance costs in the age of
computer technology. CBO has responded in a letter to the House
Economic and Educational Opportunities Committee that it has adjusted
its methodology over the years and stands by its most recent budget
savings estimates.
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We can discern no justification for taxpayers footing the
bill for higher construction costs, particularly at a time when
the Federal Government is experiencing a large budget deficit.
This would be reason enough to justify Davis-Bacon repeal.
The committee heard testimony from numerous witnesses
regarding the construction premium that accompanies Davis-
Bacon. Cindy Athey, owner of Precision Wall Tech in Northern
Virginia, testified that her painters earn $14 per hour on
private sector projects, but the Davis-Bacon wage is $21.24 per
hour for projects at the National Institutes of Health (NIH)
and the Navy Yard in the metropolitan DC area.\27\
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\27\ Testimony of Cindy Athey before the Senate Committee on Labor
and Human Resources, ``Davis-Bacon Reform,'' S. Hrg. 103-749, July 28,
1994, p. 35.
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Similarly, Hamilton Bowser, owner of Evanbow Construction
in East Orange, N.J., testified that his journeymen earn $15
per hour on private sector projects and $25 per hour on Davis-
Bacon projects.\28\ Again, U.S. citizens pay a premium for
Federal construction that is wholly unjustifiable.
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\28\ Testimony of Hamilton Bowser before the Senate Committee on
Labor and Human Resources, S. Hrg. 103-749, supra, at p. 34.
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And finally, Boyd Boehlje testified for the National School
Boards Association that Loudon County, VA, at one point had
been offered a $24,000 grant for a technical center, but the
school board declined the grant. If the school board had
accepted the grant, then Davis-Bacon would have applied to the
project and the Federal grant money would have been used to
cover the increased construction costs associated with Davis-
Bacon.\29\
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\29\ Boehlje, S. Hrg. 104th Cong., 1st Sess., at p. 3.
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Numerous academic studies confirm that Davis-Bacon raises
construction costs. The GAO found that Federal prevailing wage
increased construction costs by 3.4 percent, and the Oregon
State study indicated cost increases of 26-38 percent of rural
areas.
At the State level, scholars and experts also have
concluded that State prevailing wage laws increase construction
costs.\30\ For instance, before repealing their State
prevailing wage law, Florida experimented by exempting school
construction from the State prevailing wage law between 1974-
78. Surveying local school districts, the Florida State School
Board found that State taxpayers had saved $37 million, or
approximately 15 percent of total construction costs.\31\
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\30\ See also testimony of Armand Thioblot before the Senate Labor
and Human Resources Committee, 104th Cong., 1st Sess., at p. 6:
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Studies performed in Florida, Iowa, Kentucky, Louisiana,
Maryland, Minnesota, and New Hampshire in conjunction with
repeal or attempted repeal of State prevailing wage laws in
those States found average anticipated construction savings
of 9.4 percent from eliminating them.
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\31\ Thioblot, ``Prevailing Wage Legislation,'' at p. 163.
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Similarly, the West Virginia Graduate Business School
analyzed the costs associated with construction of an academic
center in Preston County, WV from 1987-89. The study found that
$1.5 million could have been saved if there were no prevailing
wage requirements. In addition, the State prevailing wage law
added $405,000 to the $1.35 million cost of building a garage
and municipal building in Clarkesburg, WV.\32\
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\32\ Government Union Review, Summer 1990, at p. 41.
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Sometimes the increased costs were due to higher than
market wages being paid on prevailing wage projects, and other
times the increased costs were due to declining productivity.
The Florida school system contended that wages were 23-41
percent higher than market rates, and the West Virginia study
found the State prevailing wage law ``significantly [drove up]
the labor costs on public construction projects by
approximately 30 percent.'' \33\
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\33\ Government Union Review, Summer 1990, at p. 41.
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Davis-Bacon Reduces Productivity
Witnesses who testified before the committee suggested that
Davis-Bacon's wage rates and prevailing work rule restrictions
significantly diminished productivity. For instance, Cindy
Athey of Precision Wall Tech testified that a 5,000 hour job
would take 6,000 hours to complete under Davis-Bacon.\34\
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\34\ According to Ms. Athey, ``This makes sense. Why would anyone
want to complete a project that is almost doubling their paycheck?'' S.
Hrg. 103-749, supra, at p. 36. See also the testimony of Hamilton
Bowser that workers on Davis-Bacon projects have a ``tendency to string
out the work.'' Id., at p. 37.
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Work rule restrictions decrease productivity as well. The
CBO highlighted this point in its 1983 cost study:
Although the effect of Davis-Bacon on wages receives
the most attention, the act's largest potential cost
impact may derive from its effect on the use of labor.
For one thing, DOL wage determinations require that, if
an employee does the work of a particular craft, the
wage paid should be for the craft. * * * For example,
carpentry work must be paid for at carpenters' wages,
even if performed by a general laborer, helper or
member of another craft.\35\
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\35\ CBO Report, supra, at p. 27.
CBO noted that many construction firms categorize these
individuals as ``general building mechanics,'' but if the Labor
Department has not issued a wage determination for the class of
workers, then ``workers must be paid a composite rate
reflecting several crafts, weighted for how much time is spent
on each task; this increases * * * contractors' costs for
labor.'' \36\
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\36\ CBO Report, supra, at p. 27.
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As Sam Carradine, Executive Director of the National
Association of Minority Contractors, testified, ``Davis-Bacon
requires work assignments and payroll reporting along rigid
craft-by-craft lines reminiscent of the 1930s. It fails to
reflect industry practice in private sector construction
today.'' \37\
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\37\ S. Hrg. 103-749, supra, at p. 74.
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Precision Wall Tech's Cindy Athey also expressed these
concerns. Ms. Athey testified that the ``tools of the trade''
restrictions in David-Bacon reduced productivity. Either she
had to pay a high wage to an unskilled worker simply because he
held a paint brush, or she had to pay a high wage to an
experienced worker for menial tasks. In Ms. Athey's view,
``There are many individuals who are able to hold a paint brush
or a pipe wrench, but could not be classified as a painter or
even a plumber. However, these individuals are required to be
paid the rate of a painter or plumber by the Davis-Bacon Act.''
\38\
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\38\ Athey, S. Hrg. 103-749, supra, at p. 86.
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Davis-Bacon Diminishes Training Opportunities and Entry-Level Jobs
In addition to raising construction costs, Davis-Bacon also
makes it harder to hire lower-skilled workers on construction
projects. As described above, contractors must pay the Davis-
Bacon wage scale for individuals that perform a given craft's
work. As a result, Davis-Bacon creates a disincentive to hire
entry-level workers and train them on-the-job.
Testifying for the Davis-Bacon Repeal Coalition, Maurice
Baskin told the committee this year that the Federal prevailing
wage law made it more difficult to hire lower-skilled workers
on construction projects. Mr. Baskin stated:
Helpers assist skilled journeymen and provide
entrance into the industry and the opportunity to
receive hands-on training. Clearly if contractors must
pay one high ``prevailing'' wage, they will always
choose the already skilled worker and have limited
slots available for new entrants into the industry.
This is seen most clearly in the inner cities, where a
large amount of Federal construction dollars are
concentrated.\39\
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\39\ Baskin, S. Hrg. 104th Cong., 1st Sess., supra, at p. 3.
Other witnesses who appeared before the committee
reiterated the concerns expressed by Mr. Baskin. The National
Association of Minority Contractors argued that Davis-Bacon
``freezes out lower-skill minority workers.'' \40\ And Clark
Becker, testified for the National League of Cities that:
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\40\ S. Hrg. 103-749, supra, at p. 73.
A large portion of Federal construction dollars are
targeted toward inner city development and repair.
Unemployed residents of the inner cities, a large
percentage of whom are minorities, often have not
previously been trained in the skills of the
construction industry. The Davis-Bacon Act's prevailing
wage restrictions create a disincentive for local
government contractors to offer inner city residents a
chance to work in their own neighborhoods. Repeal of
the Davis-Bacon Act would give urban cities the
discretion to create more opportunities for the
citizens who are most in need of training and
employment.\41\
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\41\ Becker, 104th Cong., 1st Sess., supra, at p. 5.
By repealing Davis-Bacon, the committee seeks to create job
opportunities for thousands of individuals in a high paying
industry. Art Pearson, a minority contractor in Washington
State, told Readers' Digest in December 1994, that Davis-Bacon
repeal would enable him to hire inner-city kids that are not
being hired now for Federal construction projects. Mr. Pearson
stated that he knew ``gang leaders who got [construction] jobs
at $10 per hour and it changed their lives.'' \42\
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\42\ Eugene Methvin, ``A Scandalous Law That's Costing Taxpayers
Billions,'' Readers' Digest, December 1994, p. 125. Mr. Pearson's
comments are easily understood because construction is a high paying
industry. The average hourly earnings of construction workers was
$14.41 per hour in 1993, second only to mining workers who earned
$14.68 per hour. In contrast, the average hourly wage in private firms
was $10.96 per hour.
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davis-bacon is impractical to administer
In addition to raising construction costs and decreasing
job opportunities Davis-Bacon also is highly impractical to
administer. GAO concluded that after over 50 years trying to
determine ``prevailing wages,'' the U.S. Department of Labor
has yet to develop an effective system to plan or manage the
data collection for producing accurate wage schedules.\43\
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\43\ See generally, GAO Report, supra, at p. ii.
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Most recently, GAO updated its seminal 1979 report
recommending Davis-Bacon repeal. In 1994, GAO wrote:
[O]ther concerns we noted in 1979 remain, most notably
the potential for wage determinations to be based on
low-quality data. For example, wage determinations
[were] completed with response rates as low as 25
percent. * * * In addition, Labor does not verify the
data received, even on a sample basis. Finally, Labor
reports that the average age of a wage survey is more
than 7 years.\44\
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\44\ GAO Letter to Sen. Larry Craig, Rep. Charles Stenholm, et.
al., GAO/HEHS-94-95R, February 7, 1994, at p. 3-4.
Even assuming that the Labor Department could effectively
determine accurate market wages, the paperwork burdens for
Federal contractors to comply with Davis-Bacon reporting
requirements overwhelm many construction firms and city
administrators. Mayor Clark Becker told the committee that
Dallas, TX each year devotes over 4,000 hours of city staff
time to ensuring compliance with Davis-Bacon requirements.\45\
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\45\ 104th Cong., 1st Sess., supra, at p. 5.
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The paperwork component of the Davis-Bacon Act, known as
the Copeland Act of 1934, which we also repeal in S. 141,
requires Federal contractors to file weekly payroll schedules
(hours worked, wages, earnings, deductions and net pay) of all
workers on the Davis-Bacon project. CBO estimated in 1983 that
this added $50 to $100 million to Federal contractor costs,\46\
and the Davis-Bacon Repeal Coalition's counsel, Maurice Baskin
concurred with this figure during the committee hearing.\47\
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\46\ CBO Report, supra, at p. 29.
\47\ S. Hrg, 104th Cong., 1st Sess., supra, at p. 3.
---------------------------------------------------------------------------
The committee notes that the Clinton administration appears
to agree that significant paperwork burdens accompany the
Davis-Bacon Act. In its initial reinventing government
initiative, Vice President Gore recommended eliminating the
weekly payroll submissions and substituting a monthly
certification of compliance.
The committee firmly believes that Davis-Bacon is no longer
needed to prevent competition from depressing wage rates and to
protect local contractors from outside competition. In fact,
contrary to its original purpose, Davis-Bacon now disadvantages
local contractors by disrupting their wage schedules and makes
it more likely that outside contractors will successfully bid
for Federal construction projects.
In addition, Davis-Bacon raises construction costs and
decreases productivity on construction sites. The act reduces
training opportunities and remains highly impractical to
administer.
For all these reasons, the committee strongly endorses
Davis-Bacon repeal.
III. Legislative Consideration and Votes in Committee
On the first day of the 104th Congress, (January 4, 1995),
Senator Kassebaum, along with Senators Jeffords, Coats, Gregg,
Chafee, Brown, Craig, Nickles, Cochran, Domenici, Grassley,
Simpson, Warner, Pressler, and Gramms introduced the Davis-
Bacon Repeal Act, S. 141.
On February 15, 1995, the Senate Committee on Labor and
Human Resources held a hearing on Davis-Bacon repeal. The
following individuals provided testimony:
The Honorable John Chafee, U.S. Senator from Rhode
Island and Chairman of the Senate Committee on
Environment and Public Works;
The Honorable Clark Becker, Mayor of Woodland Park,
Colorado, testifying on behalf of the National League
of Cities;
Boyd Boehlje, School Board Member in Pella, Iowa, and
President of National School Boards Association,
testifying on behalf of the National School Boards
Association;
Gary Hess, Hess Mechanical Corporation of Upper
Marlboro, MD;
Mill Butler, Handon Diving Inc., of Washington, DC;
Armand Thioblot, Economist, Baltimore, MD;
Maurice Baskin, Esq., testifying on the Davis-Bacon
Repeal Coalition;
The Honorable Bernard Anderson, Assistant Secretary
for the Employment Standards Administration, U.S.
Department of Labor, Washington, DC;
Robert Georgine, President of the Building and
Construction Trades Council, Washington, DC.
Additional statements or letters regarding S. 141 were also
received and placed in the record.
On March 29, 1995, the committee considered S. 141. A
quorum being present, Senator Simon offered an amendment in the
nature of a substitute, which was defeated by a 9-7 vote.
Senator Frist offered an amendment to except the Tennessee
Valley Authority from prevailing wage requirements, which the
committee adopted. The committee then ordered the bill reported
favorably by a 9-7 vote.
IV. Explanation of the Bill and Committee Views
Senate bill 141 repeals the Davis-Bacon Act of 1931, a law
that requires firms performing Federal construction costing
over $2,000 to pay their workers no less than the ``prevailing
wage,'' as determined by the U.S. Department of Labor. Senate
bill 141 also repeals the section of the Copeland Act that
requires Federal contractors to submit weekly payroll records
to the Federal Government.
Specially, Section 2 of S. 141 states as follows: ``The Act
of March 3, 1931 (commonly known as the Davis-Bacon Act) (40
U.S.C. 276a et seq.) is repealed.''
Section 3 of S. 141 states as follows: ``Section 2 of the
Act of June 13, 1934 (40 U.S.C. 276c) (commonly known as the
Copeland Act) is repealed.''
In repealing the Davis-Bacon Act, the legislation permits
local market forces to govern the bidding process. As a result,
firms will not be required to include wage schedules prepared
by the U.S. Department of Labor in their bid submissions for
Federal public works projects. Wages will no longer be
regulated, just as the prices for materials and supplies are
not regulated by the Federal Government.
In repealing the weekly reporting requirements of the
Copeland Act, S. 141 reduces the burdensome paperwork
associated with Federal construction projects. The Vice
President's reinventing government initiative has recognized
that these payroll submissions place an unnecessary burden on
Federal contractors.
The committee believes that Davis-Bacon repeal will promote
an efficient Federal Government procurement process. The price
of construction services will be established by local markets,
rather than by U.S. Department of Labor employees in
Washington, DC. And private sector work rules and pay schedules
will apply to government-funded construction.
The committee concludes that Davis-Bacon, a Depression-era
labor standards statute, is no longer necessary to prevent
competition from depressing wages. Roughly 80 percent of U.S.
construction is private sector work.\48\
---------------------------------------------------------------------------
\48\ Ten percent of U.S. construction is federally funded, and 10
percent is funded by State and local governments. In contrast, during
the Depression, 60 percent of construction was government-funded. See
``Construction Review,'' U.S. Department of Commerce, supra and GAO
Report, supra.
---------------------------------------------------------------------------
The private sector functions well without a federally
established wage schedule. The committee has not witnessed
``cut-throat'' competition in the private sector with respect
to wages, or the pricing of materials and supplies, and the
committee does not believe that repealing Davis-Bacon will
cause wages to be bid-down in the public sector.
Because Davis-Bacon wage schedules tend to be higher than
the actual local market wage, and productivity is lower when
workers must follow narrow ``prevailing'' work rules, the
Federal prevailing wage law raises Federal construction costs.
The Congressional Budget Office estimates that Davis-Bacon
repeal will save U.S. taxpayers $2.7 billion over the 5-year
budget cycle. The committee believes that Davis-Bacon repeal
constitutes a significant budgetary savings during a time when
the Federal Government is experiencing a severe budgetary
shortfall. The Congress can ill-afford to spend hard-earned
taxpayer dollars to finance Federal construction at higher than
market rates.
The committee has taken notice of the General Accounting
Office study indicating that Davis-Bacon, contrary to its
original purpose of protecting local firms and local wage
standards, actually disadvantages local contractors. When
Davis-Bacon rates were higher than local market rates, local
firms frequently did not bid for projects because they did not
wish to disrupt their wage schedules. As a result, outside
contractors frequently were the successful bidder.
The committee believes that Davis-Bacon adds costs and
reduces efficiency by requiring Federal construction
contractors to follow local prevailing work rules. The private
sector knows how to staff a job. It does not need the U.S.
Department of Labor to interpret the locally prevailing work
rules.
As a result, Davis-Bacon reduces training opportunities for
entry level workers. The committee believes that when
contractors must pay Davis-Bacon wage rates for all individuals
who handle the tools of the trade,\49\ then firms most likely
will hire the most experienced workers and actually have a
disincentive to hire entry level workers.
---------------------------------------------------------------------------
\49\ That is to say, any workers who handle a hammer must be paid
the journeyman carpenter's rate.
---------------------------------------------------------------------------
For all the above reasons, the committee believes that
Davis-Bacon repeal is in the best interest of the country at
this time. Nevertheless, Davis-Bacon supporters have advanced
various arguments for the Federal prevailing wage law, and the
committee will briefly address those arguments.
Serious Economic Consequences: Davis-Bacon supporters have
argued that serious economic and social consequences will
follow if Congress repeals the Federal prevailing wage law. The
committee rejects this argument.
The U.S. Department of Labor raised this contention in 1979
when GAO recommended Davis-Bacon repeal, and GAO responded to
the Labor Department with this statement:
Labor said that repeal of the Davis-Bacon Act would
have a serious social and economic effect on
construction workers and would undermine a basic legal
protection of the wage of American workers in one of
the largest, most economically unstable, and complex
industries. * * *
We [GAO] disagree * * * less than an estimated 1
million construction workers in 1977 were working on
contracts subject to the Davis-Bacon Act. * * * We
found no indications, and Labor did not present any
evidence, of an adverse effect on or exploitation by
contractors of the estimated 3.0 million workers
employed on construction projects not covered by the
act. (emphasis added) \50\
---------------------------------------------------------------------------
\50\ GAO Report, supra, p. 17.
---------------------------------------------------------------------------
negative effect on minority job opportunities
Davis-Bacon repeal opponents also claim that job
opportunities will decline for minorities if repeal efforts are
successful. The committee rejects this contention.
The committee notes that Federal contractors remain subject
to Executive Order 11246, which prohibits Federal contractors
from discriminating on the basis of race, religion, gender or
national origin. Similarly, all firms with more than 15
employees are covered by Title VII of the Civil Rights Act of
1964, which prohibits discrimination on the basis of race,
gender, national origin, or religion.
In addition, the committee received testimony from the
National Association of Minority Contractors that Davis-Bacon
``freezes out lower-skill minority workers.'' At the hearing,
the National League of Cities, which endorsed Davis-Bacon
repeal, testified that:
Davis-Bacon Act's prevailing wage restrictions create
a disincentive for local government contractors to
offer inner city residents a chance to work in their
own neighborhoods. Repeal of the Davis-Bacon Act would
give urban cities the discretion to create more
opportunities for the citizens who are most in need of
training and employment.\51\
---------------------------------------------------------------------------
\51\ Testimony of Clark Becker, S. Hrg. 104th Cong., 1st Sess.,
supra.
Finally, the U.S. Department of Labor argued in 1979 that
minorities had a ``tenuous foothold'' in the construction
industry and they would be ``especially vulnerable to the wage
exploitation which could occur with repeal of Davis-Bacon.''
\52\ GAO, responding to the Labor Department ``provide[d] no
factual or logical basis for its viewpoint.'' \53\
---------------------------------------------------------------------------
\52\ GAO Report, supra, p. 31.
\53\ GAO Report, supra, at p. 31.
---------------------------------------------------------------------------
Quality, Safety and Productivity
Davis-Bacon supporters contend that Federal construction is
higher quality work due to Federal prevailing wage
requirements. They believe that ``you get what you pay for,''
and any attempt to save funds through Davis-Bacon repeal will
be unsuccessful because the projects will cost more in the long
run.
The committee has considered and rejects this argument. We
have seen no evidence that private sector commercial
construction suffers from lack of quality. Commercial office
buildings are not falling down. They all meet local and state
building codes, even in areas known for earthquakes and other
natural disasters.
During the committee hearing, Mr. Mill Butler, testifying
in favor of Davis-Bacon, told the committee that 70 percent of
his work was covered by Davis-Bacon and 30 percent of his
business was private sector work. When Senator John Ashcroft
asked Mr. Butler whether his company, Handon Diving,
Washington, DC, performed lower quality work on private sector
projects, he replied, ``No, absolutely not, no.'' \54\ And Gary
Hess, testifying against Davis-Bacon, pointed out that the
``contract specifications are the same, the quality
requirements are the same'' whether or not Davis-Bacon
requirements apply to the project.\55\
---------------------------------------------------------------------------
\54\ S. Hrg, 104th Cong., 1st Sess., transcript at p. 68.
\55\ Id., at p. 69.
---------------------------------------------------------------------------
The committee finds no merit to the claim that Davis-Bacon
requirements per se improve construction quality. If the
concern is that the Federal Government cannot control the
quality of products it procures, then we must direct our
attention to our procurement laws. But we note that no one
appears to be complaining about the quality of other goods and
services in the nonconstruction arena and yet these products
are not subject to Davis-Bacon mandates.
Davis-Bacon supporters also claim that safety is higher on
prevailing wage projects. The committee rejects this argument.
During the committee hearing, Senator Ashcroft inquired
whether Occupational Safety and Health Act (OSHA) requirements
were the same on Davis-Bacon and non-Davis-Bacon sites. The
witness, Mr. Hess of Hess Mechanical Corporation in Maryland,
replied, ``Of course they are.'' \56\
---------------------------------------------------------------------------
\56\ S. Hrg., 104th Cong., 1st Sess., supra, hearing transcript at
p. 69.
---------------------------------------------------------------------------
Mr. Georgine, relying upon a flawed University of Utah
study,\57\ suggested during the committee hearing that injury
rates would increase by 15 percent if Congress repealed the
Federal prevailing wage law. The committee rejects this
argument. There is no reason to believe that injury rates would
increase simply because private sector compensation and work
rules would apply to publicly funded construction projects.
---------------------------------------------------------------------------
\57\ Mangum, Garth, et. al., ``Losing Ground: Lessons from the
Repeal of Nine `Little Davis-Bacon' Acts,'' University of Utah,
February 1995. The self-described ``working paper'' was funded by the
AFL-CIO and the Plumbers and Pipefitters of Utah, which support the
Davis-Bacon Act.
---------------------------------------------------------------------------
To the best of our knowledge, no one has performed a
comprehensive study comparing safety records for Davis-Bacon
and non-Davis-Bacon work sites. However, OSHA has compared
union versus non-union construction safety records and found
their safety records to be comparable.\58\
---------------------------------------------------------------------------
\58\ OSHA's Analysis of Construction Fatalities database for 1985-
89 found that ``the distribution of fatalities among union and nonunion
work sites is similar to the composition of the construction work force
in terms of union and nonunion workers.''
Some have argued that the Journal of Occupational Medicine (Nov.
1990) found that union sites were safer. However, the study also
concluded that when age differences were taken into account, the safety
records of union and nonunion sites were comparable. Apparently, from a
statistical standpoint, older workers have fewer accidents.
Using union safety records as a proxy for Davis-Bacon site safety
records is not a perfect analogy because some non-union firms
successfully bid for Federal construction projects and many unionized
firms perform private sector work. Nevertheless, the Utah working paper
appears to assume that prevailing wage laws primarily affect union
firms (see working paper, p. 11), so it seems appropriate in responding
to the working paper to analyze safety records as a function of union
status.
---------------------------------------------------------------------------
Finally the committee rejects arguments that Davis-Bacon
improves productivity. Davis-Bacon supporters cite Federal
Highway Administration statistics suggesting that with regard
to highway construction, many low-wage States had higher
average costs per mile and therefore lower productivity, and
many high-wage States had lower average costs and therefore
higher productivity. \59\ Accordingly, supporters argue that
prevailing wage laws improve productivity.
---------------------------------------------------------------------------
\59\ See testimony of Robert Georgine, S. Hrg., 104th Cong., 1st
Sess., supra, pp. 6-7, citing ``Wages, Productivity and Highway
Construction Costs,'' National Alliance for Fair Contracting,
Washington, DC, 1995.
---------------------------------------------------------------------------
We have not reviewed the study's methodology, so we cannot
thoroughly analyze its findings, but we believe that climate,
State sales taxes on construction, the amount of bridge versus
road work and other factors probably account for much of the
difference in cost per mile of highway construction. However,
we note that the allegedly low-wage, low-productivity States in
the study include Tennessee, Texas, West Virginia, and
Minnesota, which have State prevailing wage laws. So it seems
that prevailing wage laws failed to improve productivity in
these States.
The fact is that if prevailing wages laws actually improved
productivity, then private sector contractors immediately would
voluntarily adopt Davis-Bacon wage scales and work rules to
assure they were the successful bidders on all construction
projects. Moreover, if prevailing wage laws actually improved
productivity, then after Davis-Bacon repeal, Federal
contractors would retain prevailing wage scales to maintain
their productivity. However, the committee believes this would
not be the case.
In the committee's view, without Davis-Bacon, firms bidding
for Federal projects will use the same practices that they
utilize in the private sector. The committee firmly believes
that Davis-Bacon repeal will not affect productivity.
boost local demand
Davis-Bacon supporters also argue that the Federal
prevailing wage law is necessary to boost local demand. By
increasing government spending, construction workers have more
money to spend and the local and national economy benefit.
This argument assumes that Federal money is free. As
economist Armand Thioblot testified, ``The local economy would
be improved even more by mandating a double-prevailing-rate
wage, and would be staggering boosted by requiring construction
workers to be paid the prevailing professional baseball player
wage rate,'' \60\ but neither of those policies would be sound.
The goal of boosting local demand cannot justify paying
artificially high Federal construction costs.
---------------------------------------------------------------------------
\60\ S. Hrg., 104th Cong. 1st Sess., supra, p. 5.
---------------------------------------------------------------------------
The committee also rejects the contention that repealing
Davis-Bacon will increase the deficit by lowering Federal tax
revenues. When we spend less money at the Federal level, that
will save money. Only in the Congress would individuals argue
that if the Federal Government spent more money, then the
Federal Government would collect more revenue and the deficit
would be lower.
unions will collapse without Davis-Bacon
Some have argued that without Davis-Bacon, organized labor
in the construction industry will cease to exist. We reject
this argument.
Over 80 percent of the construction industry is private
sector construction that is not subject to Federal prevailing
wage laws. Union contractors compete effectively for these
projects under current law and they will continue to do so
without Davis-Bacon.
simon substitute was unacceptable
The committee notes that the substitute offered by Senator
Simon during the committee markup constituted a vast expansion
of the Federal prevailing wage law. The committee rejected
Senator Simon's amendment by a 9-7 vote.
The Simon substitute failed to produce significant budget
savings. Although it raised the Davis-Bacon contract threshold
from $2,000 to $100,000 for new construction and $50,000 for
renovation and repair, CBO estimated in 1993 that only $115
million would be saved over 5 years--an almost insignificant
amount. Significantly, under the new threshold, 96.5 percent of
the Federal construction contract dollar volume would still be
subject to Davis-Bacon.
In addition, the Simon substitute expanded Davis-Bacon to
cover off-site work and leased construction. In fact, the
legislation sought to codify U.S. Department of Labor
regulations expanding Davis-Bacon to off-site work despite the
fact that two recent appellate court decisions invalidated the
regulations as inconsistent with Davis-Bacon.\61\
---------------------------------------------------------------------------
\61\ Building and Construction Trades Department, AFL-CIO v. U.S.
Department of Labor Wage Appeals Board, 932 F. 2d 985 (D.C. Cir. 1991)
(``Midway Excavators''); Ball, Ball & Brosamer, Inc. v. Reich, No. 92-
5366, (D.C. Cir. 1994).
---------------------------------------------------------------------------
Moreover, the substitute added a new private cause of
action, with liquidated damages, to the Federal prevailing wage
law. These provisions would provide yet another litigation
incentive at a time when we want to reduce litigation and its
associated costs.
For all of the above reasons, the committee rejected the
substitute offered during the committee markup.
The committee adopted an amendment by Senator Frist to
eliminate the Federal prevailing wage requirements for
construction by the Tennessee Valley Authority (TVA). When
Congress created the TVA, rather than include Davis-Bacon by
reference, the Congress instead provided a separate prevailing
wage provision. The committee sees not reason why the TVA
should be required to follow prevailing wage requirements and
therefore approved the Frist Amendment.
V. Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 21, 1995.
Hon. Nancy Landon Kassebaum,
Chairman, Committee on Labor and Human Resources,
U.S. Senate, Washington, DC.
Dear Madam Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 141, a bill to
repeal the Davis-Bacon Act, as ordered by the Committee on
Labor and Human Resources on March 29, 1995.
Enactment of S. 141 would not affect direct spending or
receipts. Therefore, pay-as-you-go procedures would not apply
to this bill.
If you wish further details on this estimate, we will be
pleased to provide them.
Sincerely,
June E. O'Neill, Director.
Enclosure.
Congressional budget office cost estimate
1. Bill number: S. 141.
2. Bill title: The Davis-Bacon Repeal Act.
3. Bill status: As ordered reported by the Committee on
Labor and Human Resources on March 29, 1995
4. Bill purpose: Effective 30 days after enactment, S. 141
would repeal the Davis-Bacon Act, which requires that employees
working on Federal or federally financed construction projects
receive prevailing wages and fringe benefits. The Department of
Labor determines the prevailing wage rates and benefits for
workers on Federal construction projects, generally based on
the construction wages and benefits in the locality of the
proposed project.
5. Estimated cost to the Federal Government: S. 141 would
reduce the cost of federal or federally financed construction
projects by allowing the payment of lower compensation than
under current law. The following table shows the potential
savings to the federal government if appropriations are reduced
to reflect the lower costs of construction beginning in 1996.
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Estimated authorization of appropriations................ -826 -848 -875 -900 -931
Estimated outlays........................................ -150 -440 -616 -723 -809
----------------------------------------------------------------------------------------------------------------
The budgetary impacts of this bill fall in many budget
functions.
The authorizations of appropriations in the above table
represent estimated obligational authority, which includes
estimates of appropriated budget authority as well as estimated
obligations from certain transportation trust funds, which are
not considered budget authority. Budget authority savings for
construction projects subject to the Davis-Bacon Act (not
including trust fund obligations) are estimated to be $432
million for fiscal year 1996 and $2.3 billion over the five
years from 1996 to 2000.
6. Basis of estimate: The requirements of the Davis-Bacon
Act (DBA) affect contracts on Federal construction or federally
assisted construction of $2,000 or more, without regard to the
nature of the project. Currently, the Department of Labor makes
it wage determinations based on the specific wages and benefits
earned by at least 50 percent of workers in a classification,
or on the weighted average of the wages and benefits paid to
workers in that classification. The former method tends to be
used in heavily unionized construction markets, and the latter
in less unionized settings.
A Congressional Budget Office (CBO) study in 1983 estimated
that the requirements of the DBA increase federal construction
costs by 3.7 percent. This estimate was based on a method of
determining prevailing wages called the ``30 percent rule.''
When the 30 percent rule was changed to the currently used
``majority wage'' calculations, CBO revised its estimate to 3.3
percent. The 3.3 percent estimate also included the effects of
certain restrictions on the use of helpers, which contributed
1.6 percentage points of the total effects of the DBA. Since
that time, a Federal Court of Appeals has ruled that the
Department of Labor could impose regulations designating
helpers as a separate class of workers, which effectively would
eliminate the DBA restriction on helpers. Although the fiscal
year 1995 appropriations bill for the department prohibited the
Secretary from using any funds under that act to implement the
new helper regulations, the prohibition expires with the 1995
funds themselves. Therefore, CBO estimates that the DBA will
increase federal construction costs for contracts let after
1995 by 1.7 percent. A repeal of the DBA would allow for a
reduction in federal outlays of $150 million in fiscal year
1996 and $2.7 billion over the next five years, if
appropriations are reduced accordingly.
Any estimate of the cost implications of the DBA is
uncertain. Very little empirical work has been published on the
subject since CBO's 1983 report, and even then there was little
consensus as to the precise cost impacts. At the time, CBO's
estimate was toward the low end of the range of estimated
impacts, which stretched from 0.1 percent in a study by Steven
Allen of North Carolina State University to as much as 11
percent in a study by President Carter's Council of Economic
Advisers.
Trends since 1983 give conflicting indications as to
possible changes in the impact of the DBA. For example, fewer
construction workers are represented by unions--21.0 percent in
1993, compared with 29.4 percent in 1983. As a result, union
wages could have less of an impact in the determination of a
prevailing wage, thereby lessening the impact of the DBA on
federal construction costs. Furthermore, the wage differential
between union and nonunion construction workers has declined in
the past decade. The ratio of cash wages for union construction
workers to those for nonunion construction workers was 1.62 in
1993, as compared with 1.72 in 1983.
However, the cash wage ratio does not account for fringe
benefits, which are also covered by the requirements of the
DBA. While the wage differential may have declined, the
difference between total compensation--including fringe
benefits like health insurance--received by union and nonunion
construction workers may have grown. Unfortunately, there is no
continuous data series for total compensation of construction
workers. The first year that wage and compensation data are
available for blue collar workers is 1987, but these data cover
all blue collar workers, of which construction workers are a
subset. CBO's 1983 report was based on 1979 figures, which
indicated that the ratio of the total compensation for union
construction workers to that of nonunion workers was 1.54. The
corresponding ratio for blue collar workers (of which
construction workers are a subset) was 1.74 in 1994, the same
level as in 1987.
Finally, the data discussed above apply to a broad spectrum
of construction or blue collar workers, while much of the
federal construction funding is for highways. Whether broad
trends are indicative of the compensation patterns in highway
construction is uncertain. Thus, relevant data are sparse, the
broad trends are ambiguous, and the applicability of the
available information to estimating the impact of the DBA is
uncertain. Therefore, although we have made minor changes to
our method for estimating the federal cost impact of the DBA,
in the absence of any clear evidence to contradict the results
of the 1983 report, CBO has based this estimate on the findings
indicated in its 1983 study.
CBO projects spending authority for Federal or federally
financed construction to grow from about $48 billion in 1996 to
about $55 billion by 2000. The largest percentage of federal
construction spending is for transportation programs, at $22.7
billion in spending authority for fiscal year 1996,a or about
47 percent of the total. This amount includes spending from the
Highway Trust Fund, the Airport and Airway Trust Fund, the
Harbor Maintenance Trust Fund, and the Inland Waterways Trust
Fund. Other major areas of construction spending are natural
resources and environment ($8.4 billion), national defense
(($6.0 billion), and income security ($4.7 billion).
Construction outlays tend to flow slowly from spending
authority. Accordingly, outlays from new spending authority in
fiscal year 1996 are expected to be approximately $8.8 billion,
including $3.3 billion for transportation, $0.7 billion for
defense, and $3.5 billion for natural resources and
environment. Fiscal year 1996 construction authority in the
income security function is not reflected in outlays until
fiscal year 1997 and subsequent years. The estimated savings
from repeal of the Davis-Bacon Act are 1.7 percent of these
amounts.
7. Pay-as-you-go considerations: None.
8. Estimated cost to State and local government: The
provisions of S. 141 would have some impact on construction
costs for State and local governments. Projects involving State
and local matching funds would become less costly under S. 141.
CBO has not estimated these savings.
9. Estimate comparison: None.
10. Previous CBO estimate: On April 21, 1995, CBO prepared
a cost estimate for H.R. 500, a similar bill forwarded to the
House Committee on Economic and Educational Opportunities by
the Subcommittee on Workforce Protections on March 2, 1995. The
two estimates are identical.
11. Estimate prepared by: Christi Hawley.
12. Estimate approved by: Robert C. Sunshine for Paul N.
Van de Water, Assistant Director for Budget Analysis.
VI. Regulatory Impact
The committee has determined that there will be no increase
in the regulatory burden imposed by this bill.
VII. Section-By-Section Analysis
Section 2 of the bill repeals the Davis-Bacon Act of 1931,
40 U.S.C. 276a, 276a-1 through 276a-5. This eliminates the
current requirement that all contracts for construction,
renovation and repair over $2,000 to which the United States or
the District of Columbia is a party, contain a provision that
firms will pay workers on those projects no less than the
prevailing wage as determined by the Secretary of Labor.
Section 3 of the bill repeals section 2 of the Copeland Act
of 1934, 40 U.S.C. 276c, that requires Federal contractors to
submit weekly payroll records to the Federal Government.
Section 4 of the bill provides that the legislation will
take effect 30 days after the date of enactment. However, the
legislation will not affect any contract already in existence
at that time, or any contract that is made pursuant to an
invitation for bids that is outstanding at that time.
VIII. Changes in Existing Law
In compliance with rule XXVI paragraph 12 of the Standing
Rules of the Senate, the following provides a print of the
statute or the part or section thereof to be amended or
replaced (existing law proposed to be omitted is enclosed in
black brackets, new matter is printed in italic, existing law
in which no change is proposed is shown in roman):
DAVIS-BACON REPEAL ACT
TITLE 40--UNITED STATES CODE
[Sec. 276a. Rate of wages for laborers and mechanics
[(a) The advertised specifications for every contract in
excess of $2,000 to which the United States or the District of
Columbia is a party, for construction, alteration, and/or
repair, including painting and decorating, of public buildings
or public works of the United States or the District of
Columbia within the geographical limits of the States of the
Union or the District of Columbia, and which requires or
involves the employment of mechanics and/or laborers shall
contain a provision stating the minimum wages to be paid
various classes of laborers and mechanics which shall be based
upon the wages that will be determined by the Secretary of
Labor to be prevailing for the corresponding classes of
laborers and mechanics employed on projects of a character
similar to the contract work in the city, town, village, or
other civil subdivision of the State in which the work is to be
performed, or in the District of Columbia if the work is to be
performed there; and every contract based upon these
specifications shall contain a stipulation that the contractor
or his subcontractor shall pay all mechanics and laborers
employed directly upon the site of the work, unconditionally
and not less often than once a week, and without subsequent
deduction or rebate on any account, the full amounts accrued at
time of payment, computed at wage rates not less than those
stated in the advertised specifications, regardless of any
contractual relationship which may be alleged to exist between
the contractor or subcontractor and such laborers and
mechanics, and that the scale of wages to be paid shall be
posted by the contractor in a prominent and easily accessible
place at the site of the work; and the further stipulation that
there may be withheld from the contractor so much of accrued
payments as may be considered necessary by the contracting
officer to pay to laborers and mechanics employed by the
contractor or any subcontractor on the work the difference
between the rates of wages required by the contract to be paid
laborers and mechanics on the work and the rates of wages
received by such laborers and mechanics and not refunded to the
contractor, subcontractors, or their agents.
[(b) As used in sections 276a to 276a-5 of this title the
term ``wages'' ``scale of wages'', ``wage rates'', ``minimum
wages'', and ``prevailing wages'' shall include--
[(1) the basic hourly rate of pay; and
[(2) the amount of--
[(A) the rate of contribution irrevocably
made by a contractor or subcontractor to a
trustee or to a third person pursuant to a
fund, plan, or program; and
[(B) the rate of costs to the contractor or
subcontractor which may be reasonably
anticipated in providing benefits to laborers
and mechanics pursuant to an enforcible
commitment to carry out a financially
responsible plan or program which was
communicated in writing to the laborers and
mechanics affected,
for medical or hospital care, pensions on retirement or
death, compensation for injuries or illness resulting
from occupational activity, or insurance to provide any
of the foregoing, for unemployment benefits, life
insurance, disability and sickness insurance, or
accident insurance, for vacation and holiday pay, for
defraying costs of apprenticeship or other similar
programs, or for other bona fide fringe benefits, but
only where the contractor or subcontractor is not
required by other Federal, State, or local law to
provide any of such benefits:
Provided, That the obligation of a contractor or subcontractor
to make payment in accordance with the prevailing wage
determinations of the Secretary of Labor, insofar as sections
276a to 276a-5 of this title and other Acts incorporating
sections 276a to 276a-5 of this title by reference are
concerned may be discharged by the making of payments in cash,
by the making of contributions of a type referred to in
paragraph (2)(A), or by the assumption of an enforcible
commitment to bear the costs of a plan or program of a type
referred to in paragraph (2)(B), or any combination thereof,
where the aggregate of any such payments, contributions, and
costs is not less than the rate of payment described in
paragraph (1) plus the amount referred to in paragraph (2).
[In determining the overtime pay to which the laborer or
mechanic is entitled under any Federal law, his regular or
basic hourly rate of pay (or other alternative rate upon which
premium rate of overtime compensation is computed) shall be
deemed to be the rate computed under paragraph (1), except that
where the amount of payments, contributions, or costs incurred
with respect to him exceeds the prevailing wage applicable to
him under sections 276a to 276a-5 of this title, such regular
or basic hourly rate of pay (or such other alternative rate)
shall be arrived at by deducting from the amount of payments,
contributions, or costs actually incurred with respect to him,
the amount of contributions or costs of the types described in
paragraph (2) actually incurred with respect to him, or the
amount determined under paragraph (2) but not actually paid,
whichever amount is the greater.]
* * * * * * *
[Sec. 276a-1. Termination of work on failure to pay agreed wages;
completion of work by Government
[Every contract within the scope of sections 276a to 276a-5
of this title shall contain the further provision that in the
event it is found by the contracting officer that any laborer
or mechanic employed by the contractor or any subcontractor
directly on the site of the work covered by the contract has
been or is being paid a rate of wages less than the rate of
wages required by the contract to be paid as aforesaid, the
Government may, by written notice to the contractor, terminate
his right to proceed with the work or such part of the work as
to which there has been a failure to pay said required wages
and to prosecute the work to completion by contract or
otherwise, and the contractor and his sureties shall be liable
to the Government for any excess costs occasioned the
Government thereby.]
* * * * * * *
[Sec. 276a-2. Payment of wages by Comptroller General from withheld
payments; listing contractors violating contracts
[(a) The Comptroller General of the United States is
authorized and directed to pay directly to laborers and
mechanics from any accrued payments withheld under the terms of
the contract any wages found to be due laborers and mechanics
pursuant to sections 276a to 276a-5 of this title; and the
Comptroller General of the United States is further authorized
and is directed to distribute a list to all departments of the
Government giving the names of persons or firms whom he has
found to have disregarded their obligations to employees and
subcontractors. No contract shall be awarded to the persons or
firms appearing on this list or to any firm, corporation,
partnership, or association in which such persons or firms have
an interest until three years have elapsed from the date of
publication of the list containing the names of such persons or
firms.
[(b) If the accrued payments withheld under the terms of
the contract, as aforesaid are insufficient to reimburse all
the laborers and mechanics, with respect to whom there has been
a failure to pay the wages required pursuant to sections 276a
to 276a-5 of this title, such laborers and mechanics shall have
the right of action and/or of intervention against the
contractor and his sureties conferred by law upon persons
furnishing labor or materials, and in such proceedings it shall
be no defense that such laborers and mechanics accepted or
agreed to accept less than the required rate of wages or
voluntarily made refunds.]
* * * * * * *
[Sec. 276a-3. Effect on other Federal laws
[Sections 276a to 276a-5 of this title shall not be
construed to supersede or impair any authority otherwise
granted by Federal law to provide for the establishment of
specific wage rates.]
* * * * * * *
[Sec. 276a-4. Effective date of sections 276a to 276a-5
[Section 276a to 276a-5 of this title shall take effect
thirty days after August 30, 1935, but shall not affect any
contract then existing or any contract that may thereafter be
entered into pursuant to invitations for bids that are
outstanding on August 30, 1935.]
* * * * * * *
[Sec. 276a-5. Suspension of sections 276a to 276a-5 during emergency
[In the event of a national emergency the President is
authorized to suspend the provisions of sections 276a to 276a-5
of this title.]
* * * * * * *
[Sec. 276c. Regulations governing contractors and subcontractors
[The Secretary of Labor shall make reasonable regulations
for contractors and subcontractors engaged in the construction,
prosecution, completion or repair of public buildings, public
works or building or works financed in whole or in part by
loans or grants from the United States, including a provision
that each contractors and subcontractor shall furnish weekly a
statement with respect to the wages paid to each employee
during the preceding week. Section 1001 of Title 18 shall apply
to such statements.]
* * * * * * *